Pre-Feasibility Study

COMMERCIAL EMBROIDERY UNIT

Small and Medium Enterprises Development Authority

Ministry of Industries & Production
Government of Pakistan
www.smeda.org.pk

HEAD OFFICE
4th Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road,
Lahore
Tel (92 42) 111 111 456, Fax: (92 42) 36304926-7
helpdesk@smeda.org.pk

REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

PUNJAB
3rd Floor, Building No. 3, Aiwan-
e-Iqbal Complex,
Egerton Road, Lahore.
Tel: (042) 111 111 456,
Fax: (042) 36304926-7
helpdesk.punjab@smeda.org.pk
SINDH KHYBER PAKTUNKHWA BALOCHISTAN
5th Floor, Bahria Complex II, Ground Floor Bungalow No. 15-A Chamn
M.T. Khan Road, State Life Building The Mall, Housing Scheme Airport Road,
Karachi. Peshawar. Quetta.
Tel: (021) 111-111-456 Tel: (091)111 111 456, 9213046-7 Tel: (081) 2831623, 2831702
Fax: (021) 35610572 Fax: (091) 5286908 Fax: (081) 2831922
helpdesk-khi@smeda.org.pk helpdesk-pew@smeda.org.pk helpdesk-qta@smeda.org.pk

September 2014
Pre-Feasibility Study Commercial Embroidery Unit

TABLE OF CONTENTS
1 DISCLAIMER .......................................................................................................................3
2 EXECUTIVE SUMMARY .....................................................................................................4
3 INTRODUCTION TO SMEDA ..............................................................................................4
4 PURPOSE OF THE DOCUMENT ........................................................................................5
5 BRIEF DESCRIPTON OF PROJECT & PRODUCT .............................................................5
5.1 Production Process Flow ...................................................................................................... 6
5.2 Installed & Operational Capacities ....................................................................................... 6
6 CRITICAL FACTORS...........................................................................................................7
7 GEOGRAPHICAL POTENTIAL FOR INVESTMENT ...........................................................7
8 POTENTIAL TARGET CUSTOMERS / MARKETS ..............................................................7
8.1 Local Market .......................................................................................................................... 8
8.2 Export / Foreign Market ........................................................................................................ 8
9 PROJECT COST SUMMARY ..............................................................................................8
9.1 Project Economics ................................................................................................................. 8
9.2 Project Financing ................................................................................................................... 8
9.3 Project Cost ........................................................................................................................... 9
9.4 Space Requirement............................................................................................................... 9
9.5 Machinery And Equipment Requirement........................................................................... 10
9.6 Furniture And Fixture Requirement ................................................................................... 10
9.7 Office Equipment Requirement .......................................................................................... 10
9.8 Raw Material Requirement ................................................................................................. 11
9.9 Human Resource Requirement.......................................................................................... 11
9.10 Other Costs .......................................................................................................................... 12
9.11 Revenue Generation ........................................................................................................... 12
10 CONTACT DETAILS ..........................................................................................................13
10.1 Machinery Suppliers ............................................................................................................ 13
10.2 Raw Material Suppliers ....................................................................................................... 13
11 USEFUL LINKS .................................................................................................................14
12 ANNEXURES ....................................................................................................................15
12.1 Income Statement ............................................................................................................... 15

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12.2 Balance Sheet ..................................................................................................................... 16

12.3 Cash Flow Statement .......................................................................................................... 17
13 KEY ASSUMPTIONS .........................................................................................................18
13.1 Operating Cost Assumptions .............................................................................................. 18
13.2 Revenue Assumptions ........................................................................................................ 18
13.3 Financial Assumptions ........................................................................................................ 18

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1 DISCLAIMER

This information memorandum is to introduce the subject matter and provide a general
idea and information on the said matter. Although, the material included in this document
is based on data / information gathered from various reliable sources; however, it is based
upon certain assumptions, which may differ from case to case. The information has been
provided on as is where is basis without any warranties or assertions as to the correctness
or soundness thereof. Although, due care and diligence has been taken to compile this
document, the contained information may vary due to any change in any of the concerned
factors, and the actual results may differ substantially from the presented information.
SMEDA, its employees or agents do not assume any liability for any financial or other
loss resulting from this memorandum in consequence of undertaking this activity. The
contained information does not preclude any further professional advice. The prospective
user of this memorandum is encouraged to carry out additional diligence and gather any
information which is necessary for making an informed decision, including taking
professional advice from a qualified consultant / technical expert before taking any
decision to act upon the information.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk

DOCUMENTCONTROL

Document No. PREF-NO. 42

Revision No. 2
Prepared by SMEDA-Punjab
Revision Date September 2014

Provincial Chief (Punjab)

For Information
janjua@smeda.org.pk

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2 EXECUTIVE SUMMARY

The demand for commercial embroidery is continually rising due to urbanized population
and changing life styles. Although there are a number of local manufacturers producing
good quality of embroidered cloths but still a huge demand exists for potential investment
in the embroidery business in Pakistan.

This particular pre-feasibility study is for setting up a commercial embroidery unit for both
genders. The focus of the business would be to provide quality products like embroided
fabrics, bed sheets, table and sofa cloths, etc. All these products are proposed to be sold
to wholesalers and retail outlets in major cities of Pakistan.

The proposed business venture should preferably be located in any of the major urban
cities of Pakistan; to reduce initial capital investment, the proposed unit is to be
established at rental premises. The proposed machine can stitch 20,833 stitches in 1
hour. This unit will stitch 220 million stitches in 330 working days with 2 embroidery
machines on 16 operational hours per day, however, initial operational capacity is
assumed at 70%, whereas, maximum operational capacity utilization is at 95%. This
production capacity is estimated to be economically viable and justifies the capital as well
as operational cost of the project. However, entrepreneurs knowledge of clothing
industry, development of quality cloths, attractive designs, competitive pricing and strong
linkage with suppliers and wholesalers network are factors for the success of this project.

The estimated total cost of the proposed commercial embroidery unit is Rs. 20.74 million
out of which Rs. 13.76 million is the capital cost and Rs. 6.99 million is for working capital.
The project is to be financed through 50% debt and 50% equity. The project NPV is
around Rs. 29.11 million, with an IRR of 39% and Payback Period of 3.41 years. The
project will provide employment opportunities to 13 individuals including owner / manager.
The legal business status of this project is proposed as Sole Proprietorship.

3 INTRODUCTION TO SMEDA

The Small and Medium Enterprises Development Authority (SMEDA) was established in
October 1998 with an objective to provide fresh impetus to the economy through
development of Small and Medium Enterprises (SMEs).
With a mission "to assist in employment generation and value addition to the national
income, through development of the SME sector, by helping increase the number, scale
and competitiveness of SMEs" , SMEDA has carried out sectoral research to identify
policy, access to finance, business development services, strategic initiatives and
institutional collaboration and networking initiatives.

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Preparation and dissemination of prefeasibility studies in key areas of investment has

been a successful hallmark of SME facilitation by SMEDA.
Concurrent to the prefeasibility studies, a broad spectrum of business development
services is also offered to the SMEs by SMEDA. These services include identification of
experts and consultants and delivery of need based capacity building programs of
different types in addition to business guidance through help desk services.

4 PURPOSE OF THE DOCUMENT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in

project identification for investment. The project pre-feasibility may form the basis of an
important investment decision and in order to serve this objective, the document / study
covers various aspects of project concept development, start-up, production, marketing,
finance, and business management.
The purpose of this document is to facilitate potential investors in Commercial
Embroidery business by providing them with a general understanding of the business
with the intention of supporting potential investors in crucial investment decisions.
The need to come up with pre-feasibility reports for undocumented or minimally
documented sectors attains greater imminence as the research that precedes such
reports reveal certain thumb rules; best practices developed by existing enterprises by
trial and error and certain industrial norms that become a guiding source regarding
various aspects of business set-up and its successful management.
Apart from carefully studying the whole document, one must consider critical aspects
provided later on, which shall form the basis of any investment decision.

5 BRIEF DESCRIPTON OF PROJECT & PRODUCT

The proposed project is designed as a small scale commercial embroidery unit. This unit
will be capable of providing its services to local garments and fabric manufacturers as
well as those garment manufacturers who are dealing in exports and require embroidery
work on their garments.
This sort of project is quite flexible in a way that there is no processing of raw materials
required and each machine is independent in its working. The project can be started even
with a single machine. However, keeping in view the potential and industry norms, the
project will be more feasible and economical with two or four embroidery machines.
Due to the increase in number of commercial embroidery units and competition, there are
chances that the market rates may reduce. However, this can be tackled by providing
different value added services to customers.

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Another major threat to the business is credit factor. This is also related to the competition.
The customers may ask for credit facility for a longer period, and this can disturb the cash
cycles of the unit. This can be avoided by making a similar policy for all customers, so
there will be no complaints from customers and cash cycle will not be disturbed.

5.1 Production Process Flow

The production process flow of commercial embroidery unit starts with the purchasing of
fabric from the market, depending whether customer provides the fabric or not. Then
comes the designing and tracing phase.

The designs are developed either in house by employing a full time designer or can be
out sourced. After the completion of designing stage the designs are loaded on the
machines and then embroidery work is done by the machines on the fabrics with the help
of embroidery threads. Finally embroidered cloths are to be packed and dispatched to the
customers.

Figure 1: Production Process Flow

Receipt of Designing & Loading on

Fabric Tracing Machines

Packing &
Threading Embroidery
Dispatch

5.2 Installed & Operational Capacities

The installed and operational capacities of the commercial embroidery unit mainly
depends upon the installed machinery.
The pre-feasibility study is based on an installed capacity of 666,667 stitches per day on
16 hours basis. While maximum capacity utilization of the unit is assumed at 95%,
633,333 stitches per day and 209,000,000 stitches annually. However, during 1st year
operation unit will operate at 70% capacity and will stitch 466,667 stitches per day.
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The details of operational and installed capacity according to product mix are provided in
the table below:
Table 1: Installed and Operational Capacities
Total Production Operational Capacity 70% Maximum Operational
Capacity (Annually) (Year 1) Capacity 95% (Year 6)

220,000,000 stitches 154,000,000 stitches 209,000,000 stitches

6 CRITICAL FACTORS

Following points should also be ensured to make the business successful:

Assurance of high quality with consistency.

Surety for on-time delivery of products.
Competitive rates.
Cost efficiency through better management.
Aggressive marketing
Attractive designs.
Relationship with export manufacturers.

7 GEOGRAPHICAL POTENTIAL FOR INVESTMENT

According to the estimate given by the industry and machine sellers, there are thousands
of embroidery machines operational in Pakistan. Most of embroidery factories are located
in Karachi, Lahore, Faisalabad and Sialkot. A few factories are also located in Hyderabad,
Multan and Rawalpindi.

Therefore, any of the above cities would be a suitable location for setting up a commercial
embroidery unit. Raw material and labor is also easily accessible in these cities.

8 POTENTIAL TARGET CUSTOMERS / MARKETS

Demand of Pakistani embroidery is gaining momentum globally. Orders are being placed
from Saudi Arabia, United Arab Emirates, United Kingdom, United States, Belgium and
Oman.

Pakistan has a great potential to compete in the global market, particularly in the Middle
East markets. With little effort it can gain a reasonable share.

The markets for embroidery products are as follows:

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8.1 Local Market

According to industry estimates, about 70% of the embroidered products are used in local
(Pakistani) market. The products include women / men suits, table & sofa cover, bed
sheets, badges, logos, T-shirt, caps, etc.

8.2 Export / Foreign Market

About 30% of the embroidered products are exported to different countries. These
products include T-shirts, caps, badges, logos, women / men suits, etc.

9 PROJECT COST SUMMARY

A detailed financial model has been developed to analyse the commercial viability of the
proposed Commercial Embroidery Unit. Various costs and revenue related assumptions
along with results of the analysis are outlined in this section.
The projected Income Statement, Cash Flow Statement and Balance Sheet are also
attached as annexure.

9.1 Project Economics

The following table shows Internal Rate of Return, Payback Period and Net Present
Value.
Table 2: Project Economics
Description Details
Internal Rate of Return (IRR) 39%
Pay Back Period (Years) 3.41 Years
Net Present Value (NPV) Rs. 29,111,957
Returns on the project and its profitability are highly dependent on the efficiency of the
entrepreneur in hiring skilled persons and maintaining good quality in terms of design,
quality and customers services.

9.2 Project Financing

Following table provides the details of required equity and variables related to bank loan;
Table 3: Project Financing
Description Details
Total Equity (50%) Rs. 10,371,629
Bank Loan (50%) 10,371,629

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Annual Markup to the Borrower Long Term Loan 16%

Tenure of the Loan (Years) 5
Annual Markup to the Borrower Short Term Debt 16%

9.3 Project Cost

Following fixed and working capital requirements have been identified for operations of
the proposed business.
Table 4: Project Cost
Capital Investment Amount Rs.
Machinery & Equipment 12,705,000
Furniture & Fixture 569,000
Office Equipment 102,000
Pre-Operational Cost 380,538
Total Capital Cost 13,756,538
Working Capital Requirements
Equipment Spare Parts inventory 30,747
Raw Material Inventory 5,516,806
Upfront Building Rent 432,000
Cash 1,007,168
Total Working Capital 6,986,721
Total Investment 20,743,259

9.4 Space Requirement

In order to reduce the initial capital expenditure, the proposed Commercial Embroidery
Unit will be established in a rental premises. Therefore, space may be acquired in the
industrial state or in outskirts of big cities where skilled workers are available. The rent of
the building will depend on the area and geographical location of the unit. An estimated
area of 10 Marla (2,250 sq. ft.) will be required for the proposed venture.
The area requirement has been calculated on the basis of space requirement for
production, management and storage. However, the units operating in the industry do not
follow any set pattern. Following table shows calculations for project space requirement.
Table 5: Space Requirement
Space Requirement Area in Sq. Ft.
Management Building 400
Production area 1,300
Store 500
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Wash Room 50
Total Area 2,250
For this particular pre-feasibility the rent amount has been determined at Rs. 72,000 per
month (calculated at the rate of Rs. 32 per sq. ft.).

9.5 Machinery and Equipment Requirement

Following table provides list of plant and machinery required for an average size
Commercial Embroidery Unit.
Table 6: Machinery and Equipment Requirement
Unit Cost
Description Quantity Total Cost (Rs.)
(Rs.)
Embroidery Machine 2 6,200,000 12,400,000
UPS for Machines 2 40,000 80,000
Generator (7000 Watts) 1 100,000 100,000
Air Pressure Machine (Exhaust Fan) 1 125,000 125,000
Total 12,705,000

9.6 Furniture and Fixture Requirement

The details of required furniture and fixture for the proposed Commercial Embroidery unit
are provided in the following table:
Table 5: Furniture and Fixture Requirement
Unit Cost Total Cost
Description Quantity
(Rs.) (Rs.)
Executive Table & Chair (Owner / Manager) 1 15,000 15,000
Computer Tables 3 10,000 30,000
Visitors Sofa Set 1 15,000 15,000
Chairs 5 3,800 19,000
Fans & Lights 1 40,000 40,000
Air conditioners (1.5 ton Split) 3 60,000 180,000
Fire Extinguisher Set 1 20,000 20,000
Renovation of the Office 1 250,000 250,000
Total 569,000

9.7 Office Equipment Requirement

Following office equipment will be required for the proposed venture:

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Table 8: Office Equipment Requirement

Description Quantity Unit Cost (Rs.) Total Cost (Rs.)
Computers with UPS 2 35,000 70,000
Computer printer (s) 2 15,000 30,000
Telephones 2 1,000 2,000
Total 102,000

9.8 Raw Material Requirement

Main raw materials required are thread and sequence which is readily available in the
markets. Following are the details of raw material required for embroidery fabrics.
Table 6: Raw Material Requirement
Description Unit Cost (Rs.)
Cone 75
Sequence Thread 45
Metalic Thread (Gold) 350
Metalic Thread (Silver) 1,100

9.9 Human Resource Requirement

In order to run operations of Commercial Embroidery Unit smoothly, details of human

resources required along with number of employees and monthly salary are
recommended as under:
Table 10: Human Resource Requirement
Salary per
No. Of
Description Employee Per
Employees
Month (Rs.)
CEO / Owner Manager 1 35,000
Supervisor / Production In-charge 1 30,000
Machine Operator 2 20,000
Clippers 2 12,000
Helper 2 12,000
Office Boy 2 12,000
Guard 2 12,000
Accountant 1 20,000
It is assumed that the owner would have prior experience or knowledge about the
Commercial Embroidery Business. Salaries of all employees are estimated to increase at
10% annually.

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9.10 Other Costs

An essential cost to be borne by the business is the cost of electricity; the annual
electricity expenses are estimated as Rs. 1,128,325. This project also requires marketing
and promotional activities; for which approximately 01% of total revenues (i.e. Rs.
1,549,625) will be spent on marketing and promotion expenses annually. Similarly, during
1st year of operation communication and office expenses are estimated at Rs. 123,600
each. The cost of maintenance of machinery and equipment is assumed as Rs. 0.5 per
stitch.

9.11 Revenue Generation

Following tables provide assumption for revenues and costs of the proposed Commercial
Embroidery Unit during first year of operation:
Table 7: Revenue Generation in First Year
Finished Average Sale
Production Revenue
Goods Units Sold in Year1 Price
in Year 1 (Rs.)
Inventory (Rs. / Unit)
154,000,000 6,416,667 147,583,333 1.05 154,962,500

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10 CONTACT DETAILS

In order to facilitate potential investors, contact details of private sector Service Providers
relevant to the proposed project be given.

10.1 Machinery Suppliers

Name of Supplier Address Phone E-mail / Website

AL MURTAZA 84 J-1, M. A.
+92-42-
Machinery (Pvt.) Johar Town, www.al-murtazamachines.com
35316171
Ltd. Lahore.

10.2 Raw Material Suppliers

Suppliers Available In Address

Azam Cloth Market Lahore
Rang Mahal Lahore
Madina Market Karachi
Ghanta Ghar Chowk Faisalabad
Hussain Agahi Bazar Multan
Ganj Bazar Bhawalpur

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11 USEFUL LINKS

Small & Medium Enterprises Development

www.smeda.org.pk
Authority (SMEDA)
Government of Pakistan www.pakistan.gov.pk
Ministry of Industries & Production www.moip.gov.pk
Ministry of Education, Training & Standards in
http://moptt.gov.pk
Higher Education
Government of Punjab www.punjab.gov.pk
Government of Sindh www.sindh.gov.pk
Government of Khyber Pakhtunkhwa www.khyberpakhtunkhwa.gov.pk
Government of Balochistan www.balochistan.gov.pk
Government of GilgitBaltistan www.gilgitbaltistan.gov.pk
Government of Azad Jamu Kashmir www.ajk.gov.pk
Trade Development Authority of Pakistan (TDAP) www.tdap.gov.pk
Security & Exchange Commission of Pakistan
www.secp.gov.pk
(SECP)
Federation of Pakistan Chambers of Commerce
www.fpcci.com.pk
and Industry (FPCCI)
State Bank of Pakistan (SBP) www.sbp.org.pk
Punjab Small Industries Corporation www.psic.gop.pk
Sindh Small Industries Corporation www.ssic.gos.pk
Punjab Vocational Training Council (PVTC) www.pvtc.gop.pk
Technical Education and Vocational Training
www.tevta.org
Authority (TEVTA)
Punjab Industrial Estates (PIE) www.pie.com.pk
Faisalabad Industrial Estate Development and
www.fiedmc.com.pk
Management Company (FIEDMC)
Pakistan Institute of Fashion Design (PIFD) www.pifd.edu.pk
Pakistan Fashion Design Council (PFDC) www.pfdc.org
Ministry of Textile Industry www.textile.gov.pk
PREGMEA (Pakistan Readymade Garment
www.prgmea.org
Manufacturers and Exporters Association)

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12 ANNEXURES

12.1 Income Statement

Income Statement

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Revenue 154,962,500 190,045,625 223,025,688 260,701,306 303,681,792 352,651,362 388,769,061 427,645,968 470,410,564 517,451,621

Cost of sales
Cost of goods sold 1 132,403,333 162,379,119 190,558,002 222,748,871 259,472,334 301,313,000 332,172,749 365,390,024 401,929,026 442,121,929
Cost of goods sold 2 - - - - - - - - - -
Operation costs 1 (direct labor) 2,714,000 3,106,547 3,417,796 3,760,153 4,136,733 4,550,962 5,017,061 5,518,767 6,070,644 6,677,708
Operating costs 2 (machinery maintenance) 737,917 904,979 1,062,027 1,241,435 1,446,104 1,679,292 1,851,281 2,036,409 2,240,050 2,464,055
Operating costs 3 (direct electricity) 734,965 901,359 1,057,779 1,236,469 1,440,319 1,672,575 1,843,876 2,028,264 2,231,090 2,454,199
Total cost of sales 136,590,215 167,292,004 196,095,605 228,986,928 266,495,490 309,215,830 340,884,967 374,973,464 412,470,810 453,717,891
Gross Profit 18,372,285 22,753,621 26,930,083 31,714,378 37,186,302 43,435,532 47,884,094 52,672,504 57,939,754 63,733,729

General administration & selling expenses

Administration expense 1,236,000 1,359,600 1,495,560 1,645,116 1,809,628 1,990,590 2,189,649 2,408,614 2,649,476 2,914,423
Administration benefits expense 123,600 135,960 149,556 164,512 180,963 199,059 218,965 240,861 264,948 291,442
Land lease rental expense - - - - - - - - - -
Building rental expense 864,000 950,400 1,045,440 1,149,984 1,264,982 1,391,481 1,530,629 1,683,692 1,852,061 2,037,267
Electricity expense 393,360 432,696 475,966 523,562 575,918 633,510 696,861 766,547 843,202 927,522
Travelling expense 370,800 407,880 448,668 493,535 542,888 597,177 656,895 722,584 794,843 874,327
Communications expense (phone, fax, mail, internet, etc.) 123,600 135,960 149,556 164,512 180,963 199,059 218,965 240,861 264,948 291,442
Office expenses (stationary, entertainment, janitorial services, etc.) 123,600 135,960 149,556 164,512 180,963 199,059 218,965 240,861 264,948 291,442
Promotional expense 1,549,625 1,900,456 2,230,257 2,607,013 3,036,818 3,526,514 3,887,691 4,276,460 4,704,106 5,174,516
Professional fees (legal, audit, consultants, etc.) 774,813 950,228 1,115,128 1,303,507 1,518,409 1,763,257 1,943,845 2,138,230 2,352,053 2,587,258
Depreciation expense 1,337,600 1,337,600 1,337,600 1,337,600 1,337,600 1,337,600 1,337,600 1,337,600 1,337,600 1,337,600
Amortization of pre-operating costs 76,108 76,108 76,108 76,108 76,108 - - - - -
Bad debt expense 1,549,625 1,900,456 2,230,257 2,607,013 3,036,818 3,526,514 3,887,691 4,276,460 4,704,106 5,174,516
Subtotal 8,522,730 9,723,304 10,903,651 12,236,972 13,742,057 15,363,819 16,787,756 18,332,771 20,032,288 21,901,757
Operating Income 9,849,555 13,030,317 16,026,431 19,477,406 23,444,244 28,071,713 31,096,339 34,339,733 37,907,466 41,831,972

Other income (interest on cash) - - - - - - - - - -

Earnings Before Interest & Taxes 9,849,555 13,030,317 16,026,431 19,477,406 23,444,244 28,071,713 31,096,339 34,339,733 37,907,466 41,831,972

Interest on short term debt 128,537 128,537 - - - - - - - -

Interest expense on long term debt (Project Loan) 1,043,594 876,985 682,077 454,061 187,316 - - - - -
Interest expense on long term debt (Working Capital Loan) 530,024 445,406 346,416 230,610 95,135 - - - - -
Subtotal 1,702,154 1,450,928 1,028,492 684,672 282,450 - - - - -
Earnings Before Tax 8,147,400 11,579,389 14,997,939 18,792,734 23,161,794 28,071,713 31,096,339 34,339,733 37,907,466 41,831,972

Tax 2,074,089 3,275,285 4,471,778 5,799,956 7,329,127 9,047,599 10,106,218 11,241,406 12,490,112 13,863,690
NET PROFIT/(LOSS) AFTER TAX 6,073,311 8,304,103 10,526,161 12,992,778 15,832,667 19,024,114 20,990,121 23,098,327 25,417,354 27,968,283

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12.2 Balance Sheet

Balance Sheet

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Assets
Current assets
Cash & Bank 1,007,168 - 3,826,897 9,606,392 16,741,921 25,216,327 39,419,443 54,941,335 71,696,820 89,359,968 159,666,054
Accounts receivable 6,368,322 7,089,208 8,487,767 9,939,596 11,596,913 13,486,298 15,234,666 16,775,651 18,453,216 20,298,538
Finished goods inventory 5,938,705 6,989,917 8,191,983 9,564,565 11,129,742 12,912,309 14,203,540 15,623,894 17,186,284 18,904,912
Equipment spare part inventory 30,747 41,478 53,544 68,848 88,218 112,688 136,652 165,349 200,073 242,088 -
Raw material inventory 5,516,806 7,442,376 9,607,299 12,353,281 15,828,893 20,219,483 24,519,345 29,668,408 35,898,773 43,437,516 -
Pre-paid annual land lease - - - - - - - - - - -
Pre-paid building rent 432,000 475,200 522,720 574,992 632,491 695,740 765,314 841,846 926,030 1,018,633 -
Total Current Assets 6,986,721 20,266,081 28,089,585 39,283,263 52,795,684 68,970,894 91,239,362 115,055,144 141,121,242 169,697,705 198,869,504

Fixed assets
Machinery & equipment 12,705,000 11,434,500 10,164,000 8,893,500 7,623,000 6,352,500 5,082,000 3,811,500 2,541,000 1,270,500 -
Furniture & fixtures 569,000 512,100 455,200 398,300 341,400 284,500 227,600 170,700 113,800 56,900 -
Office equipment 102,000 91,800 81,600 71,400 61,200 51,000 40,800 30,600 20,400 10,200 -
Total Fixed Assets 13,376,000 12,038,400 10,700,800 9,363,200 8,025,600 6,688,000 5,350,400 4,012,800 2,675,200 1,337,600 -

Intangible assets
Pre-operation costs 380,538 304,431 228,323 152,215 76,108 - - - - - -
Total Intangible Assets 380,538 304,431 228,323 152,215 76,108 - - - - - -
TOTAL ASSETS 20,743,259 32,608,912 39,018,708 48,798,678 60,897,392 75,658,894 96,589,762 119,067,944 143,796,442 171,035,305 198,869,504

Liabilities & Shareholders' Equity

Current liabilities
Accounts payable 5,779,114 7,107,326 8,385,294 9,859,209 11,558,244 13,464,998 14,953,060 16,583,231 18,404,740 18,270,657
Short term debt - 1,492,261 - - - - - - - - -
Total Current Liabilities - 7,271,375 7,107,326 8,385,294 9,859,209 11,558,244 13,464,998 14,953,060 16,583,231 18,404,740 18,270,657

Other liabilities
Long term debt (Project Loan) 6,878,269 5,897,403 4,749,927 3,407,544 1,837,145 - - - - - -
Long term debt (Working Capital Loan) 3,493,360 2,995,194 2,412,410 1,730,636 933,056 - - - - - -
Total Long Term Liabilities 10,371,629 8,892,597 7,162,338 5,138,179 2,770,200 - - - - - -

Shareholders' equity
Paid-up capital 10,371,629 10,371,629 10,371,629 10,371,629 10,371,629 10,371,629 10,371,629 10,371,629 10,371,629 10,371,629 10,371,629
Retained earnings 6,073,311 14,377,414 24,903,575 37,896,353 53,729,020 72,753,134 93,743,255 116,841,582 142,258,935 170,227,218
Total Equity 10,371,629 16,444,940 24,749,044 35,275,205 48,267,983 64,100,650 83,124,764 104,114,884 127,213,211 152,630,565 180,598,848
TOTAL CAPITAL AND LIABILITIES 20,743,259 32,608,912 39,018,708 48,798,678 60,897,392 75,658,894 96,589,762 119,067,944 143,796,442 171,035,305 198,869,504

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Pre-Feasibility Study Commercial Embroidery Unit

12.3 Cash Flow Statement

Cash Flow Statement

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Operating activities
Net profit 6,073,311 8,304,103 10,526,161 12,992,778 15,832,667 19,024,114 20,990,121 23,098,327 25,417,354 27,968,283
Add: depreciation expense 1,337,600 1,337,600 1,337,600 1,337,600 1,337,600 1,337,600 1,337,600 1,337,600 1,337,600 1,337,600
amortization of pre-operating costs 76,108 76,108 76,108 76,108 76,108 - - - - -
amortization of training costs - - - - - - - - - -
Deferred income tax - - - - - - - - - -
Accounts receivable (6,368,322) (720,886) (1,398,559) (1,451,829) (1,657,317) (1,889,385) (1,748,369) (1,540,985) (1,677,565) (1,845,322)
Finished goods inventory (5,938,705) (1,051,212) (1,202,067) (1,372,581) (1,565,177) (1,782,567) (1,291,231) (1,420,354) (1,562,389) (1,718,628)
Equipment inventory (30,747) (10,732) (12,066) (15,304) (19,370) (24,470) (23,964) (28,697) (34,723) (42,015) 242,088
Raw material inventory (5,516,806) (1,925,571) (2,164,923) (2,745,982) (3,475,612) (4,390,590) (4,299,862) (5,149,063) (6,230,366) (7,538,742) 43,437,516
Pre-paid building rent (432,000) (43,200) (47,520) (52,272) (57,499) (63,249) (69,574) (76,531) (84,185) (92,603) 1,018,633
Accounts payable 5,779,114 1,328,212 1,277,968 1,473,915 1,699,035 1,906,754 1,488,062 1,630,171 1,821,510 (134,083)
Other liabilities - - - - - - - - - -
Cash provided by operations (5,979,552) (1,020,397) 7,049,417 7,803,653 9,503,508 11,244,606 14,203,116 15,521,892 16,755,485 17,663,148 70,306,087

Financing activities
Project Loan - principal repayment (980,867) (1,147,475) (1,342,384) (1,570,399) (1,837,145) - - - - -
Working Capital Loan - principal repayment (498,166) (582,784) (681,775) (797,580) (933,056) - - - - -
Short term debt principal repayment - (1,492,261) - - - - - - - -
Additions to Project Loan 6,878,269 - - - - - - - - - -
Additions to Working Capital Loan 3,493,360 - - - - - - - - - -
Issuance of shares 10,371,629 - - - - - - - - - -
Purchase of (treasury) shares
Cash provided by / (used for) financing activities 20,743,259 (1,479,033) (3,222,520) (2,024,158) (2,367,979) (2,770,200) - - - - -

Investing activities
Capital expenditure (13,756,538) - - - - - - - - - -
Cash (used for) / provided by investing activities (13,756,538) - - - - - - - - - -

NET CASH 1,007,168 (2,499,429) 3,826,897 5,779,495 7,135,529 8,474,406 14,203,116 15,521,892 16,755,485 17,663,148 70,306,087

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Pre-Feasibility Study Commercial Embroidery Unit

13 KEY ASSUMPTIONS

13.1 Operating Cost Assumptions

Description Details
Administration benefits expense 10.0% of administration expense
Travelling expense 30.0% of administration expense
Communication expense 10.0% of administration expense
Office vehicles running expense 3.0% of vehicles cost
Office expenses 10.0% of administration expense
Promotional expense 1.0% of revenue
Professional fees (legal, audit, consultants, etc.) 0.5% of revenue
Bad debt expense 1.0% of revenue

13.2 Revenue Assumptions

Description Details
Growth in Sales Price 10%
Days Operational / Year 330
Production Capacity / Year 220,000,000 Stitches
Production Capacity in First Year 70%
Percentage Increase in Production Capacity every
5%
Year
Maximum Production Capacity 95%

13.3 Financial Assumptions

Description Details
Debt 50%
Equity 50%
Interest Rate on Debt 16%
Debt Tenure 5 Years
Debt Payment / Year 4

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